New European defense giant aims at Asia-Pacific region

The scene is set for the creation of a giant defense contractor in Europe, and the Asia-Pacific region could soon become its favorite market. Under the aegis of their respective governments, Italian shipbuilder Fincantieri and its French competitor Naval Group have started discussing the terms of a possible alliance and their transformation into a single naval-defense company.

This prospective integration gained momentum last week after Fincantieri secured operational control of French shipyard STX, in which Naval Group has a minority stake. Their cooperation could focus on the design, development and maintenance of frigates, submarines, helicopter carriers, fleet auxiliary tankers and surveillance patrol ships.

The French-Italian naval duo aims to challenge global players from the United States, China, Britain, Russia and Japan. Fincantieri and Naval Group offer in essence the same products, and that has made them rivals until now. For instance, last year, the French shipbuilder lost to the Italian defense manufacturer a US$5.9 billion contract to supply Qatar with a landing-platform dock, four corvettes and two offshore patrol vessels.

The Indo-Pacific region, where the demand for warships and related defense systems is growing, is a fertile ground for the two European naval suppliers, one where they can project their possible industrial and commercial alliance.

Australia’s US$35 billion Future Frigates program is a potential target for Fincantieri and Naval Group. The Italian naval contractor is in competition with Spanish Navantia and British BAE Systems to design and build nine anti-submarine-warfare frigates for the Royal Australian Navy. Fincantieri’s design is based on its European multi-purpose (FREMM) frigate, which has been developed in cooperation with Naval Group – the first FREMM frigate was commissioned by the French Navy in 2012.

It is worth remembering that the French shipbuilder will provide Canberra with 12 Shortfin Barracuda submarines, a diesel-electric version of the nuclear-powered Barracuda-class boat.

Fincantieri and Naval Group could also make a joint bid to sell FREMM frigates to Canada. Ottawa has launched a C$62 billion (US$49 billion) tender process for 12 frigates and three destroyers. The Royal Canadian Navy has ramped up its commitment to the Pacific Ocean in the past years. In early August, it wrapped up the Poseidon Cutlass 17 operation, a five-month deployment in the region.

India is another hunting ground for Fincantieri and Naval Group. The French defense company wants to build up six new conventionally powered submarines for the Indian Navy under Project 75I, which is worth US$12 billion. Naval Group has already designed and built, in tandem with Indian Mazagon Dock Ltd, two Scorpene-class submarines, while another four are under construction.

Mazagon Dock Ltd is also teaming up with Fincantieri to build seven stealth frigates for India’s Project 17A. The Italian shipbuilder’s contribution to the development of these vessels is limited to technical advice and assistance, however.

The German addition

Fincantieri’s and Naval Group’s combined projection in the Asia-Pacific arena could receive a boost from Germany. Italian Defense Minister Roberta Pinotti said on September 29 that the planned French-Italian alliance on naval defense could be extended to Berlin. Pinotti emphasized that Italian and German submarines had the same propulsion system. Indeed, Fincantieri’s Todaro-class submarine is a variant of Germany’s Type 212 vessel.

Germany is a dynamic actor in the East Asian defense market. ThyssenKrupp Marine Systems (TKMS) is building four Type 218SG submarines for Singapore. South Korea is using German shipbuilder HDW’s Type 214 vessel as a template for its next-generation submarines program, not to mention that the South Korean Navy currently operates nine Chang Bogo-class diesel-electric attack submarines, a variant of Germany’s Type 209 boats.

TKMS, in collaboration with Turkish STM, has offered Indonesia a modified version of the Type 214 diesel-electric submarine. Jakarta plans to construct a fleet of 10 to 12 submarines and has shown interest in acquiring a number of Scorpenes.

Integration among Fincantieri, Naval Group and TKMS would eliminate this kind of intra-European competition for the Indo-Pacific defense market, fostering the expansion of their operations not only in Indonesia, but also in Vietnam, Malaysia and Singapore. Those four Southeast Asian countries are all committed to improving littoral protection in the South China Sea, where they have to deal with China’s military expansionism, as well as with piracy, illegal fishing and maritime terrorism.

French, German and Italian submarines, with their capabilities to sail through coastal shallow waters, would serve this purpose. In general, more European-manufactured naval vessels could be seen navigating the waters of the Indian and Pacific Oceans in the future – provided Paris, Berlin and Rome manage to coordinate their defense policies.

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